New Zealand GST Rate One of the Highest in ASPAC

New Zealand GST Rate One of the Highest in ASPAC Region: KPMG

• But even with a possible rise in GST, the NZ rate will be under the global average of 15.25%
• Unlike many of our ASPAC counterparts, New Zealand has very few exemptions from GST

Even at 12.5% New Zealand’s GST rate is significantly higher than the Asia Pacific (ASPAC) average, according to the latest KPMG Asia Pacific indirect tax country guide, which provides an overview of taxes in the ASPAC region.

Peter Scott, Senior GST Partner at KPMG New Zealand says, “The report shows that New Zealand’s GST rate is already above the ASPAC average of 10.8%. This is not surprising given the relative newness of many of the indirect tax regimes in the ASPAC region when compared to the more established systems, such as New Zealand and the European Union.”

However, if a rise in GST to 15% is confirmed in the upcoming budget, the gap with the ASPAC tax average will increase further.

“In addition, the report also shows that the GST system in New Zealand has very few exemptions for things like food, health or education as opposed to other countries and the Government has given strong indications that there would be no exemptions announced in the upcoming budget.

“While the GST rate may continue to be above the ASPAC average with few exemptions, the trade off is the reduction of personal income tax rates and the compensation provided for low and middle income earners, beneficiaries, super-annuitants and people receiving Working for Families. This is a good thing for the tax system as it rebalances our tax system away from taxes that are more harmful to growth.”

The report also shows that like New Zealand, other countries are using GST as a way of raising taxes and broadening their tax base. For example, India is introducing a Federal Goods and Services Tax (GST) in addition to its existing state-based indirect tax system; Malaysia is likely to introduce a GST in 2011 to replace the existing services tax and sales tax on goods; and China has endorsed a legislative plan to introduce a new federal VAT system by 2013.

The KPMG Asia Pacific indirect tax country guide – Navigating the changing landscape, compared New Zealand’s indirect tax rate against 19 ASPAC countries including Australia, Bangladesh, China, Fiji, Hong Kong, India, Indonesia, Japan, Korea, Macau, Malaysia, Pakistan, Papua New Guinea, Philippines, Singapore, Sri Lanka, Taiwan, Thailand and Vietnam.

The report is a great tool for New Zealand businesses that already operate in other countries in the Asia-Pacific region or companies that are planning to set up shop there.

ENDS

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